LIC lists at 8.11% discount at Rs 872 per share on the NSE

NEW DELHI: Insurance bememonth Life Insurance Corporation of India saw a modest stock market debut on Tuesday when it listed at Rs 872, on the NSE, down 8.11% from its issue price of Rs 949 amid uncertain investor sentiment.
The listing comes at a time when the stock markets are volatile amid inflation at an eight-year high and rising interest rates. “Due to increased inflation statistics, FII {foreign institutional investment} outflows, currency weakness, geopolitical and rate hike-related worries, markets are experiencing extraordinary volatility which has caused sell-offs in equity markets all over the world,” said Aayush Agrawal, senior analyst at Swastika Investmart Ltd.
The IPO – India’s largest ever initial share sale, was open for subscription between May 4 and May 9. It was subscribed nearly 3 times, led by strong demand from the insurer’s policyholders and employees. About 70% of the insurance major’s anchor book was subscribed by domestic mutual funds.
We are recommending buying with a medium- to long-term perspective on an at-par listing, as valuation multiple of price-to-embedded value of 1.1 times on historic basis is attractive.” said Geetanjali Kedia, senior research analyst at
Brokerage Macquarie has initiated coverage on the stock with a ‘neutral’ rating. The foreign brokerage has suggested a target for LIC at Rs 1,000, which hints at a modest 5.37 per cent upside over the issue price of Rs 949.
The brokerage said any investor, who is taking exposure to LIC, is indirectly taking exposure to equity markets and the inherent volatility that comes with it. It added that a 10 percent correction in the domestic equity market could lead to 7 percent fall in the embedded value of the state-run life insurer as against a 1-2 percent impact for private sector life insurers
Macquarie Securities’ analyst Suresh Ganapathy noted that LIC has consistently lost market share in the individual business owing to lack of product diversification and excessive focus on single-premium and group business.
The government had planned to list LIC in March this year but had to defer it as market conditions were not favourable in the wake of the Ukraine conflict.
The offering is seen as being important to India meeting its ambitious target for selling off state assets. The debut performance will also set the mood for forthcoming issues after retail investors were badly burnt by India’s recent large IPOs.
LIC offered a discount to employees and retail investors of 45 rupees per share, while policyholders were given a discount of 60 rupees per share. The shares were allotted to the successful shareholders on May 12 at the upper end of the Rs 902-to-Rs 949 price band.
The Indian IPO market, which saw dizzying growth in 2021, has had a significant slowdown this year. This shows the impact of geopolitical tensions, stock market volatility, a price correction in over-valued stocks from recent IPOs, plus concerns about rising commodity and energy prices, and slower economic growth, EY said in a report on Monday. However, if market conditions improve there could be a robust pipeline of IPOs this year as more than 20 companies have filed draft prospectuses in first quarter of this year, said Sandip Khetan, Partner and Financial Accounting Advisory Services Leader, EY India.
With inputs from Reuters

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